Tackling transparency in pay

Rosie Chapman, Secretary of NCVO’s Inquiry into Charity Senior Executive Pay

Sooner or later, it seems, every sector experiences the glare of the media spotlight over pay. For charities, the most recent spotlight moment was last summer, when a succession of media stories highlighted the high pay levels of some charity chief executives.

In response, NCVO set up a new inquiry into levels of senior remuneration. We have spent the last six months conducting research, hearing evidence and producing a set of guidelines for charities to consider when setting pay levels at the top.

Published earlier this week, the Inquiry’s report (PDF, 1.5MB) cuts through myth and prejudice to provide an evidence-base of UK charity remuneration and examines the assumptions that the public have about charities themselves.

Here, in a nutshell, are the Inquiry’s recommendations.

Firstly, the sheer diversity of charities’ size and purpose of charities meant we thought it inappropriate to recommend a maximum figure for top level pay.

Instead we have followed the twin tracks of guidance and transparency – detailed guidance for trustees, who have clear responsibility for pay policy; and a much higher level of transparency to easily and speedily inform current and potential donors who view pay levels as a major factor in their giving.

The Inquiry’s main recommendations are that:

• as good practice, all charities that employ staff should consider publishing the exact remuneration, job titles and the names of their highest-paid people, and that those charities with a gross income of over £500,000 should actually adopt such a policy
• this should be accompanied by a summary of the arguments used by trustees to justify the amounts involved and explain how they reflect the charity’s ethos and values
• all this information should be brought together, not just within the annual accounts, but also on the charity’s website no more than two clicks away from its home page.

We know these recommendations go further than the charity SORP reporting requirements. This is because the Inquiry believes that charities should achieve the very highest standards of transparency and accountability.

Together, these recommendations should help ensure charities do as effective a job explaining their senior pay levels to the wider world, as they already do in explaining their impact on it. Once adopted, they should also make it much easier for the charity sector to respond to its next moment in the spotlight.

Recommendations are one thing, practice another. NCVO is holding a breakfast learning session on Wednesday 28 May to explain the recommendations, and offer advice on how charities can implement them. The briefing will be particularly useful for Chairs and trustees who are responsible for setting pay levels, as well as for the people responsible for preparing a charity’s trustee annual report (eg finance directors, HR directors, company secretaries and communication managers).